The Chamber of Digital Commerce is pleased to support the launch of the Financial Innovation Caucus. Wyoming and Arizona have been trailblazers in FinTech innovation and we are encouraged to see this leadership continue in the Senate in a bipartisan fashion under Senators Lummis and Sinema. The Chamber has called for U.S. competitiveness and leadership in DLT and digital assets in its National Action Plan for Blockchain and we are confident that the Caucus will continue the drumbeat in the Senate.
Category: Uncategorized
Your Firm’s Success Depends On An Effective Data Quality Model
Your Firm’s Success Depends On An Effective Data Quality Model
A guest blog from Chamber Member PeerNova
June 7, 2021
To learn more about this important topic, be sure to download our Data Quality White Paper.
The success of a business relies on its data quality. Data must be correct, consistent, complete, and timely for it to be useful and fit-for-purpose. However, achieving high-quality data has been a significant challenge within today’s financial firms. Low-quality data can quickly trickle down the pipeline, causing a variety of issues for firms of all sizes. For example, a single low quality datum can result in business leaders making uninformed decisions and submitting inaccurate regulatory reports. This can lead to missed opportunities, client dissatisfaction, and heavy regulatory fines. Firms must also use additional resources to fix any errors or resolve exceptions, increasing their overall operational costs. It becomes critical that businesses implement an effective data quality tool or data quality platform to meet their goals, and ultimately, succeed.
What is a Data Quality Tool?
A data quality tool identifies, parses, and corrects flawed data to support effective information governance and data management. It applies rules and automates manual processes to ensure that firms have high-quality data throughout their organization. High-quality data that is ingested or integrated into the firm’s systems still undergoes various transformations that could compromise its quality. Therefore, catching any inaccuracies is vital at all touchpoints of a business. Data quality tools typically address four core areas:
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- Data cleansing
- Data integration
- Master data management
- Metadata management
Data quality tools create rules to correct data that streamline processes, reduce operational costs, and improve the accuracy of downstream analytics and insights. Modern solutions can now also provide data mapping, consolidation; ESL (extract, transform, load); and more. Additionally, reconciliation functions are also performed by most of today’s data quality tools.
What are the Challenges with Today’s Data Quality Platforms?
Ensuring end-to-end (E2E) data quality across the firm is laborious and costly, due to the inherent complexity of business processes and the heterogeneous nature of IT applications. Many data quality platforms on the market have significant limitations due to their static nature. These solutions often perform data quality checks as a last step in the pipeline, instead of perpetually checking the data throughout the data’s lifecycle. Additionally, most are batch-oriented and bilateral, which means that to perform data quality checks on entire business flows, multiple bilateral checks must occur. As a result, firms must increase their operational resources to hire teams to manually fix errors and unify siloed systems, applications, and workflows.
What Benefits Can an Effective Data Quality Tool Provide?
There are a variety of benefits that firms can experience by implementing an effective data quality tool.
Better Decision-Making and More Opportunities
Firms have continuous, high-quality data, resulting in more accurate analytics, clearer insights, and accurate data-driven decisions. Institutions can then monetize their data for direct top-line growth.
Reduced Risk and Regulatory Fines
Firms can be confident in the data they are submitting to regulators, reducing their regulatory risk and avoiding hefty fines.
Increased Operational Efficiency and Reduced Costs
Firms no longer have to manually comb through and verify large volumes of data manually. They can use fewer resources, and avoid false or duplicate investigations.
What is the Ideal Data Quality Platform?
The ideal data quality solution provides the following:
Continuous, E2E Data Quality
An effective solution provides continuous data quality by performing data quality checks and applying data quality rules across siloed systems, applications, and workflows. Additionally, the tool should automate the process of acquiring data, connecting datasets, running data quality checks, generating relevant reports, and fixing errors in real-time.
Faster Exception Management and Root-Cause Analysis
Using an effective data quality tool, firms can perform faster exception management and root-cause analysis to manage, prioritize, and resolve errors as they occur. This also reduces resolution times for data quality, SLAs, and timeliness metrics, ultimately leading to better operational efficiency and faster time to market.
Zero-Code Automation
With a zero-code platform, business users can easily create, reconfigure, and implement a variety of applications and workflows themselves through a self-serve graphical user interface (GUI).
Enterprise-Scalability
It is vital that the tool achieves continuous data quality at scale, through stream-based execution and auto-scaling to handle any volume spikes. By implementing an effective data quality tool, firms increase their operational efficiency, reduce risk, and make better decisions. At its core, the PeerNova Cuneiform Platform is a zero-code platform that provides continuous data quality and simplifies exception resolution across internal and external data sources. For more information, please visit peernova.com or contact us.
Treasury Adopts Chamber Proposals into Tax Compliance Agenda
Information reporting guidance is critical to enabling taxpayers to comply with their tax obligations, and we support the Treasury Department in finally considering this much needed guidance. For too long the cryptocurrency industry has been cast as failing its tax compliance obligations. However, a lack of guidance has hindered tax professionals and taxpayers from meeting those expectations. In its American Families Plan Tax Compliance Agenda published today, the Treasury Department proposes coverage of foreign financial institutions and cryptoasset exchanges and custodians in its plan to close the tax gap by increasing information reporting. This is welcome news.
Last year, the Chamber of Digital Commerce urged the Treasury Department and the IRS to release much needed information reporting guidance to support just this. Last week, we proactively identified for the IRS and Treasury a Tax Policy Framework where clarity and guidance must be provided this year for cryptoasset transactions, including information reporting. Anticipating that the IRS is considering the application of the Foreign Account Tax Compliance Act (FATCA) to cryptoassets held offshore, we also provided detailed input to ensure better outcomes for the industry. We look forward to working with the IRS and Treasury on their proposals in an advanced notice of proposed rulemaking – which would enable time for industry input before finalizing a rule in this complex space.
We are concerned, however, with how cryptocurrency is characterized in the Compliance Agenda. The Treasury Department asserts cryptocurrency possesses a “significant detection problem by facilitating illegal activity broadly including tax evasion” and cites to a report from 2013 – a year before the IRS released taxpayer guidance for cryptocurrency – to support its claim. Not only does this negative characterization harm the reputation of an industry that supports compliance efforts and law enforcement objectives, but it relies on outdated information from almost a decade ago to back up its statement. As we said in our Framework, “published tax guidance relating to digital asset transactions has not kept pace” with the significant growth of these markets. “This disparity creates risk for taxpayers seeking to comply, wastes IRS audit resources, dampens commercial activity and economic recovery, and stifles U.S. innovation,” noting that the IRS has not released meaningful guidance since Notice 2014-21, published seven years ago. The GAO also noted that the IRS suffers from a significant lack of data to support an understanding of the extent of any underreporting, and information reporting is designed to do just that.
The Chamber has maintained a proactive focus on cryptoasset-related tax policy issues and welcomes the opportunity to serve as a continued resource for the Treasury and IRS.
Clear Rules of the Road Sought as Members of Congressional Blockchain Caucus Pen Letter to U.S. Accounting Standards Organization on Need for Digital Asset Accounting Standards
Chamber Encourages the Commodity Futures Trading Commission and the Consumer Financial Protection Bureau to Foster Blockchain Innovation
In comments submitted this week to the Commodity Futures Trading Commission (CFTC) and the Consumer Financial Protection Bureau (CFPB) in separate proceedings, the Chamber encouraged both agencies to foster blockchain innovation and permit the introduction of new financial products based on blockchain technologies.
Our comments to the CFPB on their proposed policy on no-action letters and the product sandbox recognized the potential of both tools to bridge the gap between the deliberate pace of regulation and the rapid pace of innovation, while upholding the principle to first do no harm. We expressed our broad support for the policy and our strong support for regulatory efforts in the United States that: (i) eliminate unnecessary burdens to apply for access to these tools; (ii) enhance the reliability and practicality of these tools; and (iii) promote coordination among regulators.
Likewise, in our comments to the CFTC, we expressed our broad support for the agency’s efforts with respect to financial products involving virtual currencies through the LabCFTC and a variety of other mechanisms. While we do not advocate for any particular blockchain technology, we supported the agency’s efforts to learn more about Ether and the Ethereum network as well as the Commission’s self-certification process as the appropriate framework for the introduction of new derivatives, such as those based on Ether.
In comments to both agencies, we stressed the need for enhanced coordination among regulators, particularly in light of the byzantine structure of U.S. financial services regulation. We encourage all financial regulators to collaborate on effective and efficient approaches to achieve regulatory goals while promoting investment and growth.
The Chamber’s comments to the CFPB are available here, and our comments to the CFTC are available here.
Evaluating Market Structure for the Marketplaces of the Future
Evaluating Market Structure for the Marketplaces of the Future
February 15, 2021
The world is moving towards an era of multi-asset digital marketplaces, which will require a rethink of market structure and regulation.
Traditional marketplaces had different venues for different assets or items. We saw this both for financial assets, with stocks trading on stock exchanges and commodity futures trading on different, specialized exchanges, as well as when we walked around shopping in our local town or city with clothing stores, electronics stores, leather goods stores and individual stores for everything else.
This paradigm changed a bit over time in the physical world with the advent of supermarkets that consolidated all types of foods plus other household goods in a single space. Then came shopping malls that brought together all kinds of specialty stores. The culmination was “superstores” that sold nearly everything. While this evolution took time to happen in the physical world, online retailers like Amazon, eBay and Etsy realized that they could stock and sell most anything on one website. These websites become the superstores and shopping malls of online shopping. The shopping experience was perhaps not quite as pleasant as wandering around being able to touch everything and take it home with you, but it made up for this limitation with convenience and a seemingly endless number of choices for everything.
Meanwhile, when it comes to financial assets there is still a much more traditional arrangement. Stock exchanges and commodity exchanges still exist. They are linked together by the intermediaries who facilitate trading but you cannot go to one venue to trade a stock for a commodity future.
The financial world is on the brink of the next evolution in trading venues. In the fully-realized digital age, the linkages that the internet creates along with digital asset representations on blockchain mean that a single marketplace can trade the tokenized form of anything and everything. There is no physical need for distinct trading venues, and the exchange of one asset for another can take place directly (a literal swapping of items). We are already seeing the early stages of this evolution with so-called DeFi trading platforms like the decentralized exchanges (“DEx”). There is no distinct asset type that trades on a DEx; any token can be exchanged for any other token, regardless of their features and functions. Market structure is changing right before our eyes!
Policymakers and regulators need to understand this shift and work to re-envision market structure regulation. This will be difficult because everyone is used to regulating solely by asset type rather than in markets where assets intermingle. The best way to start thinking about the design of such regulations is from first principles. Some core concepts include: (1) protecting sellers and purchasers from fraud and false information, (2) requiring appropriate disclosures from all participants, (3) fostering market integrity through transparency about how the trading venue functions, (4) market data standards, and (5) requirements on intermediaries.
These innovations in marketplaces will change the way we think about buying, selling and trading assets. By establishing principles early, policymakers will lay the foundations for innovations and advancements that improve commerce, simplify access and provide greater economic and financial opportunities for the broadest community possible: the whole world.
About the Author
Lee A. Schneider is the General Counsel of Block.one, with responsibility for its various policy initiatives. He is a long-time financial services and technology lawyer with extensive experience in blockchain. Lee co-hosts the Appetite for Disruption podcast with Troy Paredes and is the contributing editor for the Chambers and Partners Fintech Practice Guide.
About Block.one
Block.one is a global software company specializing in high performance blockchain software. In 2018, it published EOSIO, a free, open-source protocol designed to bring speed, scalability, and ease of use to the secure and transparent fundamentals of distributed databases. Block.one’s venture capital arm, EOS VC, invests in companies, projects, and developers around the world leveraging EOSIO technology.
We sent Bitcoin to Congress … Where did the BTC come from?
We sent Bitcoin to Congress … Where did the BTC come from?
The Chamber of Digital Commerce recently launched a bold new initiative called Crypto for Congress. With support from pioneering Members of Congress and U.S. partners across the blockchain ecosystem the Chamber’s PAC is proud to have given contributions, in #bitcoin, to the campaigns of every Member of Congress.
Crypto for Congress’ mission is to raise awareness, understanding and acceptance of cryptocurrencies, digital assets and blockchain technology among our nations’ leaders in Washington. In putting together this initiative we wanted to showcase the tremendous innovation and entrepreneurship that U.S. companies are contributing to the borderless, open-source blockchain industry. One vertical in particular, cryptocurrency mining, is seeing a convincing share of global activity shift towards miners based in the United States.
The Chamber of Digital Commerce PAC worked with incredible partners in Core Scientific, Luxor Mining and Flipside Crypto to deliver the Members’ campaigns bitcoin that was verifiably #MinedInAmerica.
Core Scientific kicked off the process by generating hashpower across their facilities in Dalton, GA, Calvert City, KY, and Marble, NC. To produce the #MinedInAmerica BTC, they pointed their hashpower at a pool managed by Luxor Mining.
The hashpower that Core Scientific produced was directed at a dedicated BTC mining pool run by Luxor’s US-based team. On October 5, 2020 a clean block was mined to generate bitcoin specifically for the contributions that the Chamber’s PAC made to the 541 Members of Congress.
Once the #bitcoin block was mined, the newly minted coins were deposited into the Chamber PAC’s wallet. From there, the BTC was sent to wallet addresses that were designated for each of the Congressional campaigns.
After the bitcoin reached the campaigns wallets, Flipside Crypto’s Boston-based team verified the American provenance of the bitcoin that was sent to the campaigns. Flipside tracked all transactions from the moment they were mined by Luxor’s pool, through to when the campaigns received them. Flipside Crypto proudly certified that the Chamber PAC’s bitcoin was #MinedInAmerica !
America’s footprint in the cryptocurrency industry is growing larger by the day and we are eager to showcase U.S.-based companies that are pushing the boundaries of the digital frontier. We are proud to see the contributions that our fellow Americans are making to this globally distributed movement and hope that our effort further illuminates the promise and potential that our industry is already demonstrating right here on U.S shores.
Important Step for Industry as FinCEN Incorporates Chamber Position on Travel Rule
Important Step for Industry as FinCEN Incorporates Chamber Position on Travel Rule
Agency Seeks to Clarify through Regulation that the Travel Rule Applies to Virtual Currency Industry, Implying It Did Not Apply Previously
On Friday, October 23, the Financial Crimes Enforcement Network (FinCEN) acknowledged a legal argument we made with respect to the Funds Travel Rule. We argued that this Rule, as currently written, is specific to legal tender fiat and, in order to apply it to the virtual currency industry, FinCEN must formally amend the Rule. Last week, FinCEN proposed to amend the Rule through its joint Notice of Proposed Rulemaking (NPRM) with Board of Governors of the Federal Reserve System (the Fed) to “provide clarity concerning the application of the Recordkeeping and Travel Rules.”
The Travel Rule has been a fiery topic for several years now. It is triggered when a customer wants to transfer $3,000 or more to another account at another financial institution. When that occurs, the financial institution must collect certain information from that customer, including name, account number, and information related to the transaction, among others. If the customer is a new customer and the transaction is made in person, the institution must also verify the customer’s identity and obtain a taxpayer identification number (such as a social security number). This can be a point of friction for any organization when onboarding a customer. (The receiving and intermediary financial institutions have similar obligations.) The Rule also requires that the information be transferred to the receiving institution, which creates a cybersecurity and privacy risk to the customer’s data.
Our argument was a procedural one. The Rule as written is specific to money, which is defined as “a medium of exchange currently authorized or adopted by a domestic or foreign government.” While FinCEN amended its regulations in 2011 to apply the money transmitter provisions of the Bank Secrecy Act to virtual currency, it did not do so with respect to the Travel Rule. On November 26, 2019, we wrote to FinCEN to urge them to initiate a notice and comment rulemaking process (such as this NRPM) to fix this discrepancy.
Clearly, the Travel Rule is coming worldwide. Last year, the Financial Action Task Force (FATF) adopted Recommendations related to virtual assets to make that a reality. Nevertheless, we believed the United States still needed to make the appropriate regulatory adjustments to ensure that the Travel Rule properly applied to our industry. We urged this be corrected so that industry could participate in fashioning a rule that enables compliance and promotes law enforcement objectives, while providing clarity in the application of the Rule moving forward.
In its NRPM, FinCEN highlighted our efforts, acknowledging “that at least one industry group has asserted that the Recordkeeping and Travel Rules do not apply to transactions involving CVC, in part because the group asserts that CVC is not ‘money’ as defined by the rules.” FinCEN has proposed to define the term “money” in the definitions of “payment order” and “transmittal order” (key terms in the Travel Rule) as, “(1) a medium of exchange currently authorized or adopted by a domestic or foreign government, including any digital asset that has legal tender status in any jurisdiction and (2) CVC.”
The effect of this move highlights the fact that application of the Funds Travel Rule was not clear previously – a fact that we laid out in meticulous detail with legal analysis in our November letter. We are greatly encouraged that FinCEN has taken the necessary steps to correct this and properly apply it through this process.
While this is a significant step for industry, we must recognize that many of the objectives of the Travel Rule still apply under other Bank Secrecy Act (BSA) and Office of Foreign Assets Control (OFAC) compliance regimes. Under the BSA, you must still understand your customer so that you have a baseline to monitor transactions and effectively report suspicious activity. Under OFAC, you must know who the counterparties are to your transactions so that you do not violate economic sanctions. BUT, institutions should not be required to transfer the information to other financial institutions at this time. Such a result has the practical effect of acknowledging our proposal for a safe harbor to require financial institutions to obtain and retain such information, but not transfer it until a safe and secure transfer system is functional.
In addition, the NPRM also proposes reducing from $3,000 to $250 the threshold in the BSA’s Recordkeeping and Travel Rules for banks and nonbank financial institutions for funds transfers in and out of the United States. We anticipate addressing this proposed change, which is different than the definitional amendments noted above.
Comments on the NPRM are due by Friday, November 27. The Chamber intends to submit a response through its AML Task Force.
Crypto For Congress Op-Ed
Why Every Member of Congress Just Received Bitcoin
Op-Ed by Perianne Boring, Founder & President, Chamber of Digital Commerce
Learning by doing is the most effective way to learn something new, especially when it comes to technology. Our brains respond and adapt through experiential learning. Think of the first time you sent an instant message, made your first call on a mobile phone, downloaded your first app on a smart phone, or set up your first social media account. Receiving your first cryptocurrency is a teachable moment.
Many Americans have already experienced their first digital currency transaction and are rapidly embracing the technology. According to a study by Coin Metrics, 15% of all American adults – and 27% of Millennials – own some form of cryptocurrency. In addition, more than 33%. of small and medium-size businesses in America are now accepting cryptocurrencies as payment for goods and services.
Since Bitcoin’s inception in 2009, the idea and promise of blockchain technology has seized the imagination of engineers, scientists and technologists around the world. These nascent and evolving innovations offer immense possibilities for business, government, and consumers. The United States has a unique opportunity to catalyze rapid economic growth, while fostering and encouraging innovation towards a new digital economy for the whole world to use.
Elected officials alike must understand that the United States’ technical preeminence is at risk if we fail to acknowledge the role blockchain technology will play in the global economy for many generations to come, similar to the Internet. Technology providers estimate that 10 percent of global GDP will likely be stored on blockchain technology by 2025 to 2027.
Education is the first step we must take to bring policymakers together to gain widespread support for a successful path forward for digital assets and ensure the benefits of blockchain technology are realized in the United States. The Chamber of Digital Commerce exists in part to offer education and hands-on learning to Members of Congress that will empower them to receive and send cryptocurrencies and use blockchain technology.
While cryptocurrency is another way to pay for something digitally, there is much, much more going on beneath the surface. Blockchain technology, the technology underpinning cryptocurrencies, doesn’t just keep track of financial transactions, it can also serve as a timestamping method akin to a digital notary, enabling new forms of corporate and social organization, and improving the way we transact digitally.
Additionally, blockchain’s open, public ledger technology enables transactions to be traceable for law enforcement purposes and has been successful in protecting financial systems and the public from bad actors.
Today, many small and medium-sized businesses accept cryptocurrency as payment for goods and services. It’s time for Congressional campaigns to do the same.
One of the biggest challenges campaigns face is fundraising. Most Members of Congress spend hours a day on fundraising efforts alone, oftentimes asking the same pool of long-time supporters for ever more money. It’s a necessary, but time-consuming distraction from governing, with an imperfect and unpredictable return on investment.
Just think of the ‘first-to-market’ benefit past candidates had who embraced websites, email, and social media. These forward-thinkers gained a strategic advantage because of their ability to understand and leverage the new technology before their competitors.
The United States has one of the lowest rates of youth voter turnout in the world. If politicians want to appeal to younger voters, they need to speak their language and reach them in ways that resonate. More than 89 million Millennials who hold some form of cryptocurrency today are passionate about this new system of money and are likely to support candidates who embrace its possibilities.
Just as campaigns use social media to target different demographics, campaigns rely on a variety of different payment methods to solicit donations from different communities. Imagine if campaigns told direct mail donors that they could give only by credit card, or donors over the phone they had to go to a website. If you don’t let donors give and engage how they want to, they won’t.
Every day, cryptocurrency takes another step toward mainstream use. Investors are allocating more of their portfolios to it, entrepreneurs are pivoting their businesses towards it, and, perhaps most importantly, young people are drawn to it. Embracing cryptocurrency signals to those who believe in it that Members of Congress are in tune with the latest, cutting-edge technology.
Perhaps most importantly, for the U.S. to maintain its global leadership, we must remain at the forefront of advanced technologies. Blockchain might soon be considered ‘critical infrastructure’ within the new digital economy. China and the E.U. understand this and are already well ahead of the curve. Separately, each has publicly declared they want to be the global leader of developing blockchain technology and have strategic national initiatives underway. This would be a significant challenge to both our national security and economic security to have foreign actors controlling the systems and governance that will power the digital economy.
Accepting cryptocurrency campaign contributions is one small yet impactful way Members of Congress can demonstrate their commitment to helping the U.S. maintain its technological leadership.
We at the Chamber are ready to help all Members who are ready to learn about blockchain technology and better understand its enormous potential for innovation and economic growth.
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Perianne Boring is the Founder and President of the Chamber of Digital Commerce, the largest trade association dedicated to supporting the blockchain industry and educating policymakers on how the technology works while addressing regulatory concerns.
Canada Election Strategy
Canada Election Strategy
OTTAWA, August 13, 2019 – Chamber of Digital Commerce Canada, the voice of Canada’s blockchain community, is releasing its election campaign and strategy. The plan – “Strategizing for the Future: Building a National Framework for Blockchain in Canada” – calls on federal parties to recognize Canada’s robust blockchain and digital asset ecosystem.
“The federal government has indicated its interest in expanding Canada’s innovation capacity and leadership around the globe, and we believe blockchain should be a key technology included in these conversations,” said Tanya Woods, Managing Director. “We encourage all federal parties to support blockchain in their election platforms.”
Put simply, a blockchain is a distributed ledger that holds an immutable record of digital asset transactions. Virtually all assets, tangible or intangible, can be recorded, traded, and tracked on a blockchain. Over the last decade, blockchain technology has shown the capacity to improve business processes, increase efficiency, and promote transparency in both private and public sector applications. A survey from the World Economic Forum expects about 10 percent of global GDP to be stored on blockchains by 2025.
Some of the most prominent and forward-thinking blockchain innovators are Canadian. However, lagging policy and regulatory uncertainty in this space are driving businesses out of the country and into more competitive jurisdictions. Without action from the federal government, Canada’s position as a global leader will be threatened.
“We look forward to working with Canada’s political and policy leaders to develop and implement a robust blockchain innovation strategy that drives prosperity, job creation and investment in Canada. We are hopeful for the future of our industry in Canada,” said Woods.
Blockchain Technology Policy Becomes Focus of Senate Banking Committee Hearing
Blockchain Technology Policy Becomes Focus of Senate Banking Committee Hearing
August 5, 2019
Chamber Submits Testimony – ‘Examining The Regulatory Frameworks of Digital Currencies and Blockchain’
Just before Congress adjourned for August recess, the U.S. Senate Committee on Banking, Housing, and Community Affairs held a hearing titled Examining Regulatory Frameworks for Digital Currencies and Blockchain. This hearing came after the Chamber’s Congressional Blockchain Education Day, where nearly 120 of our member companies joined together and demonstrated to Congress that this community is much bigger than one company or one application. We are in a critical moment, prompted by Facebook’s announcement of the new Libra platform, where we are at risk of policy being made without full understanding of this vibrant ecosystem. We were pleased to submit our testimony to the Senate Banking Committee that provided us the opportunity to re-focus the policy discussion to take into account the full potential and unique characteristics of blockchain technology.
In our testimony, we detail the principles and specific areas of regulatory friction related to financial services that must be addressed when establishing government priorities for blockchain technology.
The key messages from our testimony are summarized as follows:
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- The need for decisive government support. We need comprehensive U.S. government support for the growth of this technology. In the twentieth century, the U.S. government realized the tremendous potential of the Internet and took a central role in nourishing, developing, and promoting its creation and widespread adoption. Ultimately, the U.S. government must publicly recognize the importance of blockchain and establish a framework for enabling and promoting its development.
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- Complex regulatory framework for trading platforms and exchanges. The CFTC, FinCEN, SEC, state regulators, and other regulatory bodies all have jurisdiction to oversee various aspects of virtual currency markets. Even regulators agree that it is time to reevaluate this unnecessarily complex framework.
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- Clear guidance for digital tokens is needed. The Howey Test for determining whether an investment contract is a security dates back almost 75 years and was not created with the digital age in mind. While SEC commissioners and staff have made attempts through speeches, testimony, enforcement actions, and other means to signal to market participants the characteristics of a token that might render it a security, these statements are not binding on the Commission and has led to businesses halting the development of platforms in the United States.
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- Clarifications concerning custody of digital securities tokens. Securities laws dating back over 75 years did not anticipate the current uses of technology for digital assets. For example, the application of possession or control standards for digital securities needs to take into account the technological reality of how these digital assets are managed.
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- Blockchain technology brings significant advances to anti-money laundering compliance. Blockchain technology’s ability to track and trace transactions is a technological advancement and has already provided a boon to law enforcement and its efforts to detect and prosecute criminals. Further, additional guidance is needed to aid financial institutions in their treatment of blockchain-based assets under existing law.
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- New state laws recognizing smart contracts as legal contracts are unnecessary. Existing law, without further revision, supports the formation and enforceability of smart contracts.
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- Critical need for accounting standards for digital assets. Currently, there are no accounting principles generally accepted in the U.S. that specifically address accounting treatment for digital assets, including virtual currencies. The absence of accounting standards is a critical issue for companies seeking to invest and innovate in blockchain technology.
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- Existing tax guidance requires additional consideration and clarification. Comprehensive guidance addressing the nuanced treatment of virtual currencies under U.S. tax law must be provided before any enforcement actions are initiated.
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As we conclude in our testimony, it is clear more work needs to be done. Without addressing these pressing issues, the United States will not maintain its technological and economic leadership and fall behind other countries who are recognizing this extraordinary opportunity and the benefits blockchain technology brings to government, business, and consumers.
Read the Chamber’s testimony here.